Tag: get rich

Is PacBio A Millionaire Maker?

Is PacBio A Millionaire Maker?

ericmilton

What do Amazon, MercadoLibre and Shopify have in common?

If you bought 1000 shares of any one of these companies early in its lifecycle, you could have had a millionaire maker.

A millionaire maker is a stock that singlehandedly turns you into a millionaire, provided you’re not one already.

Millionaire makers are easy to spot in hindsight, but extremely difficult to identify in the present.

Take Amazon (NASDAQ: AMZN) for instance. At the beginning of 2002, AMZN was trading at $10.82 a share and had a market cap around $7.5 billion. This was right after the dot-com bubble burst, and AMZN was looked at by many as merely a survivor.

Over the next 18 years, AMZN would go on to become a compounding machine, appreciating 29,000%. If you’d bought 1000 shares at $10.82, and held it until today, you would have $3,150,000.

So…what are the characteristics of a millionaire maker stock?

If we look at AMZN, MercadoLibre (NASDAQ: MELI) and Shopify (NYSE: SHOP) we will find similarities.

Similarity number one: Each of these companies was the lead dog in a growing industry.

AMZN is the lead dog in e-commerce in the United States. MELI is the lead dog in e-commerce in Latin America. SHOP is the leader in e-commerce solutions for entrepreneurs in America.

Similarity number two: Huge TAM (total addressable market).

The total addressable market (TAM) refers to the amount of potential or anticipated sales in a particular industry. The TAM for each of these companies is massive. The opportunity in e-commerce alone is in the trillions of dollars globally.

Similarity number three: Millionaire makers tend to have optionality (but not always).

Optionality is the ability of a company to expand into new businesses over time, continuing to increase its TAM.

Thirty years ago, millionaire maker stocks did not have to have optionality. Home Depot (NYSE: HD), one of the greatest (if not the greatest) stock of all time, does the same thing today it did when it IPOed. In this new world, however, millionaire makers have to have optionality. For example, Amazon started out just selling books, and now it sells everything under the sun. It’s also the dominant player in cloud computing with AWS (Amazon Web Services).

Similarity number four: Millionaire makers tend to have smaller market caps.

If you want a potential millionaire maker stock , try to find companies with a market cap less than $10 billion. You could have bought MELI and SHOP when they were both valued at less than $1 billion. AMZN had the largest market cap among the three at around $7.5 billion before making its big move.

So…is Pacific Biosciences (NASDAQ: PACB) a millionaire maker?

I have no idea, but it has some qualities that I like when I compare it to previous millionaire maker stocks.

Who is Pacific Biosciences?

PacBio, according to its website, “provides sophisticated genomic analysis systems that deliver invaluable insights for scientists who strive to resolve complex genetic challenges.” PACB is the pioneer of long-read human genome sequencing with its HiFi sequencing method. Its current market cap is $2.88 billion.

How big is the total addressable market (TAM) for PacBio?

In order for a company to be a millionaire maker, it must have a huge TAM. Over the next five to ten years and beyond, genomics is expected to generate trillions of dollars in market cap. The future of health care will be to focus on preventing and curing disease using the most revolutionary medical breakthroughs of our time. Gene sequencing companies will play a huge role in making this possible.

When the TAM is potentially in the trillions, there is some serious money to be made! In 2002, when Amazon was a $7.5 billion company, very few people understood or knew its total addressable market. As it turns out, Amazon’s optionality made its TAM in the multiple trillions. Great management, execution and vision took AMZN from a small cap to a super mega cap with a current market cap over $1.5 trillion.

What is genomics?

The Human Genome Project was “the international scientific research effort to determine the DNA sequence of the entire human genome” (source: genome.gov). A genome is the complete set of genetic instructions necessary to build a living being – in this case, a human. In 2003, the cost of sequencing a human genome was $2.7 billion. Then Illumina (NASDAQ: ILMN) came along with revolutionary technology that lowered the cost of sequencing a gene from $2.7 billion to $600.

Is PacBio the lead dog in genomics?

The simple answer to this question is no. Illumina is currently the lead dog in genomics with about 90% of the gene sequencing market.

However, here’s what is so interesting about PacBio…

In 2018, ILMN made a bid to purchase PACB for $1.2 billion in cash. The deal eventually fell apart because the regulators were not going to allow it; ILMN is practically a monopoly in genomics, and purchasing PACB would have been a huge antitrust issue.

Now the question we have to ask ourselves is: why did Illumina want to purchase PacBio? PacBio has been a publicly traded company for a decade. During that time period, the stock has done nothing.

Well, although Illumina is the leader, it specializes in short-read next generation sequencing instruments, while PacBio has pioneered long-read sequencing. Long-read sequencing can detect difficult to sequence mutations called structural variants, which cannot be detected with short-read sequencing.

In addition, PacBio’s technology has made terrific strides since 2018. According to ARK Invest, “PacBio HiFi reads…produced more accurate data than…Illumina… suggesting that PacBio now is the industry leader in complete, highly accurate sequencing.”

In summary

Pacific Biosciences is a small cap company that may be on the verge of becoming the industry leader in gene sequencing. If PACB’s HIFI reads can become the industry standard in the age of genomics, they could very well become a millionaire maker stock.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click here to be taken to its Amazon page.

(Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

 

 

 

Guest Post: Love Your Children Well by Investing in the Future

Guest Post: Love Your Children Well by Investing in the Future

ericmilton

Hello, all! Today we have a guest post from Chris Pascale…

Love Your Children Well by Investing in the Future

By: Christopher Pascale

Taking care of your children involves taking care of yourself. If they have a roof over their heads and food in their bellies, you need to think about what else really matters. For example, they need to be clothed, but they do not need to be on fashion’s cutting edge. They need an education, and this can include music and martial arts, but if your budget is going to be busted by private lessons, then the church choir and school wrestling team will do the trick.

This article will discuss how you can love your children well via 3 investments:

  1. Your retirement
  2. Their education
  3. Their retirement

You need money for yourself when you’re older, and it should be among the very first things you buy after you pay your rent and buy groceries. They need the advantages that come with an education, as well as an early start toward their savings and retirement.

Your Retirement

I mentioned in an earlier piece called “Is 15 Too Young?” that I did not put anything away toward retirement until I was 25, and it was only $25/month. 12+ years later I still have that account, and it receives $150/month. This money comes out on the 1st, and sometimes brings my available funds to nearly zero after I pay the mortgage and other first-of-the-month expenses.

But it’s completely necessary, because my kids need me to have money when I’m older, because if I have nothing, I could become a burden upon them.

In addition to this independently established account, I also have a TSP through the federal government that receives 5% of my income, which is matched, and a 403(b) plan through Suffolk County Community College, where I have $400 taken from each paycheck when I teach.

The total cash retirement savings may be $1,000,000 when I’m eligible to take it out at 59 ½, but it could be much less because I missed some good boom times, and I also plan to stop working for the federal government at 48, which means no funds will be added to the account.

In addition to this, my wife and I will have multiple pensions from our (1) military service, (2) careers in government, and (3) teaching.

Lastly, we have a home that will be paid off.

This is not a very special plan for retirement, and that’s the beauty of it. You can save away for retirement, possibly obtain some kind of pension, even in as little as 5 years in many cases, as noted in this study on school district pensions, and if you buy a home you can afford before the age of 40, should be able to pay it off.

If you know this, it’s because you’ve become educated. Now, we need to discuss your children’s education.

Your Children’s Education

Some will tell you that your kids will only have the best chance at life if they go to the finest boarding schools and then the best Ivy League university.

WebMD fails to mention this not because it is run by a group of doctors looking to leapfrog their kids ahead of yours; it’s because the best chance at life is not merely measured by how rich your friends are, but by the quality of your relationships, and how you navigate them, often modeled by parents.

There are many cases in the US where it really doesn’t matter where you go to school. I say this as someone who has paid a great deal of money for music lessons, tutoring, wrestling camps, and more. I also say it as someone who made the conscious decision to move my children out of Louisiana, in part, because the public schools are so far behind. Had I have stayed, I’d be mortgage-free while living on only my passive income, but all 4 of my daughters would have completed 2nd grade with never doing math beyond 9+9. That’s a real example. 9+9 was as high as my daughter went in math problems as a 2nd grader in Louisiana.

The question is, if education is an investment of tons of time, and a good deal of money, what is the return?

This BLS chart shows the following:

Level of Education Percentile of Income Weekly Income
Less Than High School 10th $330
Less Than High School 50th $515
Less Than High School 90th $999
High School 10th $395
High School 50th $718
High School 90th $1,489
Some College 10th $427
Some College 50th $799
Some College 90th $1,637
4-year Degree 10th $580
4-year Degree 50th $1,189
4-year Degree 90th $2,609

If your child enters the workforce as a low-earning high school dropout, he’ll make about 83% ($330 vs. $395) of his graduating peers, and as a high-earning dropout, his income would be about 67% ($999 vs. $1,489).

Just by staying in a free high school, your student has a chance to earn over $3,300 more per year as a low earner, and $25,000 more as a high earner.

This completely free education, on average, helps our children make hundreds of thousands more during their lifetime.

But this isn’t what we think of when it comes to investing in our children’s education. We usually think of college.

My oldest is going to community college next Fall. She’ll be a general studies major with the goal of transferring after 2 years. Those first two years will only cost $12,000, and when she gets her bachelor’s degree there will be no indication that she ever went to a community college; just that she is a 4-year graduate.

While in school now, she is already exploring workplace opportunities by taking vocational courses in physical therapy and graphic design. She’s also considering audiology as a potential career. Her passion is creative writing, and maybe she will be a rich and famous novelist one day, but her other passion is moving into her own home. She wants to be an independent adult, and that means getting a good-paying job, for which graphic design, physical therapy and audiology are great choices; creative writing is not.

What about school choice? For example, if my daughter gets accepted into Yale to study French, but also a middle ranking polytech to study engineering, I’m going to wonder why she can’t just go to France on a work visa. If her answer is that she wants to be a US diplomat, then Yale and French are great choices.

But! Can I, or she, pay for the schooling? Yale costs about $50,000 a year. My income isn’t high enough, nor are my assets large enough to cover it when I have three other kids to think about, as well as my own retirement. Remember, it’s not a blessing to her if I forfeit my own financial well-being so that she can hang out at some Skull & Bones parties before becoming a member of the US State Department. Even if this leads to her marrying into a wealthy family – the kind that Chris Rock calls wealthy – and they can put me on an allowance, that’s also terrible, as I’d be an embarrassment to her.

Adding to Chris Rock’s wisdom, we need to build our own wealth that can be passed down while helping our children do the same.

Your Children’s Retirement

Your kids need to earn money and put some away. First, it’s good for them. Second, don’t you wish you’d have put money away earlier?

Prior to investing long-term they should have savings. Don’t get so wrapped up in how great their lives can be in the future that you forget to secure the present. All 4 of my girls have passbook savings accounts. When they get money for their birthdays, they make a deposit. When we read an educational book together they deposit a check I write them, and if they happen to be holding a lot of cash, I’ll encourage them to deposit some of it.

This savings has been crucial. One example was when there was a lice outbreak at their school! I was able to stay lice-free by keeping my hair short, but no matter how hard my wife tried, they had to go to The Lice Fairy, and at $200 per head, it broke our budget. AND THEN IT HAPPENED AGAIN! For trip #2, I withdrew a combined $1,000 from each of their accounts, and my wife went in with them again. This example is proof that savings will save them today, but we must also set them up for the future with long-term investing.

Two of my four daughters are now investing in Roth IRA accounts, and the other two have some money in the stock market. One bought shares in the Rocky Mountain Chocolate Factory (RMCF), as analyzed here, and the other bought Hershey’s (HSY). The older girls like having real money put away for later, and the younger ones like the idea of owning a piece of something they like.

How to Get Started

This is going to seem too simple. First, if your children have money – really, any amount of money – go to a credit union or bank and open a passbook savings account. Then, once they earn any money from a job, and it will be reported to the IRS, open a Roth IRA, or a mutual fund.

With the Roth, set it up with automatic deposits, even if only for $25 per month. The key is that the money goes into the account, and stays there.

When they make deposits into their passbook, show them the interest and explain that this is their money making money. And then explain that some people have so much money that they don’t even have to work; their money just makes it all.

When their retirement statement comes in the mail, let them see it. My oldest surprised me when she saw that hers had $800. She said it made her feel like she was going to have a lot of money when she was older. It gave her peace of mind, which, apparently, can be bought, and in this case for as little as $800.

Christopher Pascale is an author, accountant and adjunct professor from Long Island. He is the former CFO of Portfolios with Purpose, and is a current member of the IRS’ Office of the Chief Counsel.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)